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Reaping the Whirlwind of Central Bank Malfeasance & Fiscal Profligacy

News that Monetary Authority of Singapore cut its benchmark interest rate sent the Singapore $ to a 4-year low against the US $.

This is another sign of the endgame of so many years of central bankers complicity with suppressing interest rates to boost the temporary feel-good effects of credit-driven growth. A plunging euro along with downdraft for currencies of many of Asia’s industrialized economies signals a skirmish in what is shaping up to be a full-blown currency war & a tit-for-tat cycle of depreciating currencies.

As it is, the “best” way for governments to repudiate debts without outright default is to trigger domestic price inflation and/or to rely on currency depreciation.

All this has come to pass due to artificially-low interest rates arising from “monetary central planning” that punished savers while allowing governments to go on excessive borrowing-and-spending binges.

Of course, America’s central bankers are the primary villain in this tale. However, most central bankers chose to set their own policies in tandem & in response to move by the FED. In turn, these choices removed the disciplining effect of international inflows & outflows that would normally accompany growing public-sector debts & the flood of liquidity sent into financial markets.

Instead of price inflation, the tsunami of credit-driven liquidity brought an endless array of “bubbles” even as central bankers pretended to be innocent of such events.

Now it will become increasingly clear that “anything that cannot go on forever, won’t” … !

Credit-driven growth will soon reach its logical end as burdens of repayment of interest obligations become unsupportable at current interest rates, likely to lead to the “Mother of All Liquidity Crunches”.

About christopher

Content of "Natural Order" attempts to reflect the commitment of Universidad Francisco Marroquin to support the development of a society of free & responsible individuals. The principal commentator for this blog is Christopher Lingle.